We need to know more about who owns our farmland

Sunday, October 4, 2015

No agency tracks the ownership of Canadian farmland. Yet the few experts who are trying to study this say more information is needed on changing ownership patterns to understand their effects on agriculture, rural communities and sustainable land use

by PAT LYNCH

I do not know how much land in Ontario is currently owned by large corporations that reside either inside or outside of Canada. There is speculation that pension fund managers are buying land as a stable investment. Ontario farmland is one of the few investments that have increased in value over time.

I have read one 2010 study indicating that almost one-quarter of rented land in Ontario is owned by investors and investment companies and that three per cent of the owners of rental land were foreigners living outside Canada.

I have no problem with these facts – as long as they lead to smart land use. By this, I mean land stewardship that includes erosion control, crop rotation and general good management of insects and diseases. These are all necessary for the long-term sustainability of Ontario agriculture.

Unfortunately, too often the large tracts of rented land that are owned by big landowners get failing grades in all categories.

It is ironic that land is bought as a "good investment" when that investment is not managed to ensure it remains a good investment. Too often, the land is rented to the highest bidder. The people managing the investment only look at short-term returns and not at long-term value.

Or it is rented to a large renter in the area. If big land parcels are rented to one party, there is less paper work than if the land is rented to several smaller growers who have a track record of good soil management.

Now it is not that I believe that all large cash croppers do a poorer job of managing land than smaller growers. But there is a tendency for larger growers to use more tillage, less rotation, a smaller genetic base and fewer herbicide and insecticide groups. It is cheaper and simpler than changing programs for every 100 acres.

These tactics are used to ensure profitability on large acres. Large-acre growers tend to have higher production costs than smaller-acre growers. This is because it is simpler to use more inputs "just in case." The exception to this generalization is fertilizer. One way larger acre growers can make a profit is to "mine" the soil.

So what is the solution? Simple. Owners of large acres should insist on some basic information on their land. They need to know the rates and amount of inputs. They need to know what pest and soil management techniques are used. And this should all be overseen by a Certified Crop Advisor who is not selling inputs to that renter.

A second problem is that no one is actively tracking foreign ownership of farmland in Canada.

While land title offices in all provinces record ownership information on all land transactions, they do not track citizenship or residency. To come up with an accurate assessment of who owns land would require the individual examination of every land title.

However, because of the importance of knowing who owns farmland, a few researchers are attempting to do this analysis. At the University of Guelph, ag economist Alfons Weersink, along with James Bryan and Brady Deaton, has co-authored the study 'An Empirical Examination of Landowner Characteristics, Social Capital, and Farmland Rental Rates in Southern Ontario.' The authors surveyed 240 farmers in southern Ontario in 2010 to determine the impact of land ownership on rental rates.

They found that, in 2010, 65 per cent of Ontario farmland was owned by the actual farmer. Of the rented land, roughly 70 per cent was owned by retired farmers, widowers, families living on the land, or by active farmers who were renting some of their land to another farmer. However, almost one-quarter of the rental land was owned by investors (16 per cent) and investment companies (eight per cent). The researchers also found that three per cent of the owners of rental land were foreigners living outside Canada.

Weersink wasn't aware of other economists working on foreign ownership when he did that research. "Ownership of farmland is very difficult to track," he points out. Overall, however, his thinking is that "foreign ownership is perceived to be a bigger problem than it is."

More recently, André Magnan at the University of Regina collaborated with other researchers to study the issue. This study attempts to track the changing pattern of farmland ownership and the impact such changes have on agriculture and rural communities. But the researchers faced the same obstacle, Magnan says. "We found no agency that keeps track of this in Canada. We are the first to analyze investor ownership."

The study provides a detailed breakdown of the ownership of farmland in three rural municipalities in Saskatchewan where initial research had identified there was significant change occurring in ownership patterns. In those three municipalities, they found that non-farming investors or funds now own between 7.8 per cent and 13.1 per cent of the land.

Magnan's group also noted the consolidation of land ownership by big producers. In one municipality, just four farm operations made up of a mix of actual farmers and investors now own 28 per cent of the farmland.

The study also found that the pace of outside ownership of land is speeding up. Most of the change in ownership patterns in Saskatchewan has happened in the past 10 years, occurring after land ownership laws in the province were relaxed. Increasing farm size by big producers has accelerated over the past seven or eight years, Magnan adds. "Ownership patterns are changing quickly and on a fairly large scale."

This study raises a number of questions which Magnan says requires further examination. He believes we need to determine the potential impacts of ownership pattern change both on family farms and on rural communities. Study is also needed on the social, economic, environmental and sustainability impact of investor ownership, Magnan says, and he adds that we need to know how this will have an impact on the entry of young people into agriculture.

Many farmers are also critical of agricultural lending policies, under which money is readily lent to private investment funds, enabling investors to leverage invested funds into even larger land purchases. Interestingly, Corinna Mitchell-Beaudin, executive vice-president and chief risk officer with Farm Credit Canada, says FCC stopped loaning money to large investors and pension funds a couple of years ago.

"We no longer lend to large funds which intend to purchase farmland for the purpose of renting it out," says Mitchell-Beaudin. "FCC decided, in today's vibrant ag economy, that there was no longer a need for FCC support of large investor funds."

What does this all mean for the price of farmland? University of Victoria graduate student Peter Bell is studying the impact of foreign ownership on the competitiveness and sovereignty of Canadian farming. In a 2012 paper, he argues that the 2011 price of farmland was 73 per cent lower in Saskatchewan than it would have been if foreigners had been able to purchase Saskatchewan farmland.

While the average price of land in 2011 in Saskatchewan was $584 per acre, he calculated the additional competition from more buyers would have pushed that average to $1,015 per acre.

Bell wonders if this underpricing of Saskatchewan land due to ownership laws was a contributing factor to the growth of farmland investment funds.

Higher land prices are a double-edged sword. While higher prices are a benefit to farmers seeking to exit the industry, it also makes it more difficult for young people to begin farming. BF

Consulting agronomist Pat Lynch, CCA (ON), formerly worked with the Ontario agriculture ministry and with Cargill.